CFA Level I · CFA Level I Exam · Analysis of Income Taxes
Under IFRS, the tax base of an asset is best described as:
The tax base of an asset is the amount attributed to it for tax purposes, meaning the amount that will be deductible against taxable economic benefits when the carrying amount is recovered. It differs from cost or fair value because tax deductions reduce it over time.
- Athe amount attributed to the asset for tax purposesCorrect
- Bthe original purchase price of the asset, unadjusted
- Cthe fair value of the asset at the reporting date
Explanation
The tax base of an asset is the amount that will be deductible against taxable economic benefits when the carrying amount is recovered. In effect, it is the value attributed to the asset by the tax authority. It is not the unadjusted cost or fair value, because depreciation allowances and other tax adjustments change it.
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